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all applications with exception to single family residential systems. The decision required the PAsto develop a pool calculator based on the TRNSYS Type 344 model and incorporate the poolprogram into the existing commercial/multi-family incentive budget. The Pool Program is nowactive, and it is hoped that by adding incentives for solar pool heating systems the program can getcloser to reaching the aforementioned goals.2.3. Program BudgetThe total incentive budget (excluding administrative, marketing, and measurement and evaluationbudget allocations) for the CSI-Thermal Program is approximately 280.8 million over the life of theprogram. Of this total, 180 million is allocated to natural gas-displacing SWH systems, asauthorized by AB 1470, and up to 100.8 million may be used to fund electric-displacing systemssubject to overall CSI budget availability, as authorized by Senate Bill (SB) 1. There is also anadditional 25 million incentive budget dedicated to low-income single-family and multi-familyresidences in the service territories of PG&E, SCG and SDG&E, as established in D.10-01-022.In the CSI-Thermal Program, incentive dollars totaling 180 million for natural gas-displacingsystems are allocated between two customer classes, single-family residential and multifamily/commercial. In D.12-08-008, the Commission updated the budget allocation as follows: 45 percent of the total incentive budget is reserved for single-family residentialcustomer SWH systems; and 55 percent of the total incentive budget is reserved for multi-family/commercial SWHsystems. Funds may be moved from the multi-family/commercial budget to the singlefamily residential budget, but not vice versa.The incentive budget is split proportionately among the PAs based on the size of their respectivegas and electric sales.Table 1 presents the incentive allocation percentage and budget allocated to each PA for thenatural gas-displacing SWH systems. Table 2 presents the incentive allocation percentage andbudget allocated to each PA for the electric/propane-displacing SWH systems.The incentive budget for the natural gas-displacing portion of CSI-Thermal Program will operateuntil the earlier of: (i) allocation of all funds available from the program’s incentive budget; or (ii)until January 1, 2018. The incentive budget for the electric/propane-displacing portion of theprogram is available until the earlier of: (i) the budget caps have been reached; (ii) the CSI GeneralMarket Program budget has been exhausted, or (iii) January 1, 2017.The 25 million natural-gas low-income incentive budget is allocated among CCSE, PG&E, and SCGin the same proportions as the total CSI-Thermal natural gas-displacing program presented in Table7

1. Single-family and multi-family projects have no specific low-income incentive allocations.Incentives for low-income projects will be available until the earlier of: (i) the incentive budget isfully expended; or (ii) January 1, 2018. Table 3 displays the incentive allocation percentage andbudget for each PA for the low-income natural gas-displacing SWH systems.Table 1: Incentive Allocation per PA for Natural Gas-Displacing SystemsPABudget AllocationTotal Incentive Budget(in millions)PG&E39.0% 70.2CCSE10.0% 18.0SCG51.0% 91.8Total100.0% 180.0Table 2: Maximum Incentive Allocation per PA for Electric/Propane-Displacing SWH SystemsPABudget AllocationMaximum Incentive Budget(in millions)PG&E43.7% 44.0CCSE10.3% 10.4SCE46.0% 46.4Total100.0% 100.8Table 3: Low-Income Incentive Allocation per PA for Natural Gas-Displacing SWH SystemsPABudget AllocationMaximum Incentive Budget(in millions)PG&E39.0% 9.75CCSE10.0% 2.50SCG51.0% 12.75Total100.0% 25.008

2.4. Incentive StructureOne of the primary goals of the CSI-Thermal Program is to lower the cost of SWH technology for theSystem Owner through incentives. Incentive rates decline over the life of the program in four stepsto facilitate market transformation.Natural gas-displacing incentives decline from step to step in each service territory when the totalincentive amount reserved is equal to the budget allocation for the given step. If a PA receivesapplications accounting for more dollars than what is left in the budget allocation for a given step, alottery may determine which projects receive the higher incentive level. Table 4 presents the dollaramount paid per therm displaced in each step and the total program budget allocation per stepexcluding the low-income budget as noted in Section 2.3 of this report.Table 4: Total Natural Gas Budget Allocation per Incentive StepEffective January 1, 2013Step1234Incentive per annualtherm displacedMaximum Incentiveper SystemSingle-Family 18.59 2,719Commercial/Multi-family 14.53 500,000Swimming pools 7.00 500,000Single-Family 13.11 1,919Commercial/Multi-family 9.88 500,000Swimming pools 7.00 500,000Single-Family 7.69 1,125Commercial/Multi-family 6.55 500,000Swimming pools 5.00 500,000Single-Family 3.23 474Commercial/Multi-family 3.13 500,000Swimming pools 3.00 500,000Customer Class*Swimming pool incentives are new to the Program as of Jan. 15, 2014.As incentives decline under the natural gas-displacing program, a corresponding step reductionoccurs in the electric/propane-displacing incentive structure. Table 5 shows the electric- andpropane-displacing rates for each of the four steps. Electric- and propane-displacing SWHinstallations count against the MW trigger in Step 10 of the General Market CSI PV Program. If theStep 10 budget is insufficient, the PAs may use funds from Step 9.9

Table 5: Electric/Propane-Displacing System Incentive StepsEffective July 4, 2012Step1234Electric/PropaneDisplacingIncentive ( /kWh)MaximumIncentive perSystemSingle-Family0.54 1,834Commercial/Multi-family0.42 250,000Single-Family0.38 1,311Commercial/Multi-family0.29 250,000Single-Family0.22 752Commercial/Multi-family0.19 250,000Single-Family0.10 329Commercial/Multi-family0.09 250,000Customer ClassIncentive step changes move independently in each program territory 6 and for each customerclass. Incentives are paid on a first come, first served basis. The most current information onincentive step status per customer class is posted on www.csithermal.com/tracker.The Low-Income program has a separate incentive step structure from the mainstream program, asshown in Table 6. The current incentive step level is the same as the current incentive step in thenatural gas portion of the mainstream CSI-Thermal Program. Currently, the mainstream natural gassingle-family program is in Step 1 for all PA territories; therefore, the low-income single-familyprogram is also in Step 1.6SCE incentive step changes will correspond with SCG gas incentive step changes for each customer class.10

Table 6: Low-Income Single-Family and Multi-family Natural Gas Incentive StepsSingle-Family Lowincome Incentiveper thermdisplacedIncentive Cap forSingle-Family Lowincome ProjectsMulti-family LowIncome Incentiveper thermdisplacedIncentive Cap forMulti-family Lowincome Projects1 25.64 3,750 19.23 500,0002 20.52 3,000 15.39 500,0003 15.38 2,250 11.53 500,0004 9.40 1,376 7.05 500,000StepLevel2.5. Program EligibilityEligibility for the CSI-Thermal Program is described in detail in the CSI-Thermal Program Handbook. 7A few key eligibility requirements are highlighted below: Customer site must be within the service territories of SCG (for natural gas only), PG&E, SCE(for electric only), or SDG&E. Single-family residential SWH systems must have a Solar Rating and Certification Corporation(SRCC) or International Association of Plumbing and Mechanical Officials (IAPMO) Standard-300System Certification. 8 Solar collectors used in multi-family/commercial water heating must have SRCC or IAPMOStandard-100 Collector Certification. All components must be new and unused (with exceptions). All systems must have freeze andstagnation protection. For single-family projects, all Domestic Hot Water (DHW) end-uses are eligible. 9 For multi-family/commercial projects, eligible end uses include domestic hot water,commercial process heat, space heating, absorption chilling pool heating applications, and7The CSI-Thermal Handbook is located at http://gosolarcalifornia.org/documents/CSI-Thermal Handbook.pdf8D.11-11-004 was approved on November 18, 2011 to modify D.10-01-022 regarding certification standards for SWH systems. Thisdecision allows systems certified to the OG-300 standards by IAPMO to be eligible for CSI-Thermal Program incentives along with thosecertified by SRCC.9DHW is defined as water used, in any type of building, for domestic purposes, principally drinking, food preparation, sanitation andpersonal hygiene (but not including space heating, space cooling, or swimming pool heating).11

combination systems. 10 Rebates are available for qualifying natural gas-and electric-displacingsystems that were installed within 24 months after the date on the final signed-off permit.Propane-displacing systems are eligible for a CSI-Thermal Program incentive if a final permitwas signed-off after June 14, 2011. SWH contractor or self-installer must complete a one-day mandatory training offered by thePAs. For specific details regarding low-income eligibility requirements, please see the CSI-ThermalProgram Handbook.3.Program ExpendituresFrom program inception through March 31, 2014, CSI-Thermal Program expenditures totaled 39,640,316. Table 7 illustrates the detailed expenditures by PA followed by a breakdown ofexpenses specific to the natural gas and electric/propane-displacing programs for the reportingperiod as represented in Table 8 and Table 9.Program expenditures consist of, but are not limited to, administration activities, such asapplication processing, continued enhancement of the statewide online database, mandatorycontractor and self-installer training, local and statewide marketing efforts, activities related topotential program expansion, and administrative staffing support.See Table 7, next page, for a breakdown of expenditures by PA.10Examples of eligible DHW end uses in include: apartment buildings with central DHW systems, convalescent homes, hotels and motels,military bachelor quarters, school dormitories with central DHW systems and prisons. Examples of eligible commercial end uses include:commercial laundries, laundromats, restaurants, food processors, agricultural processes and car washes.12

Table 7: CSI-Thermal Expenditures by PANatural Gas and Electric/PropaneCSI-Thermal Program Expenditure Data January 1, 2010 to March 31, n 1,478,808 735,976 3,405,429 2,287,697 7,907,910MarketFacilitation 1,213,145 746,440 4,756,282 4,726,768* 11,442,635 10,369 0 4,435 0 14,804IncentivesPaid 3,573,179 61,702 8,638,133 8,001,953 20,274,967Total 6,275,501 1,544,118 16,804,279 15,016,418 39,640,316Measurement& Evaluation* This amount also includes total Statewide M&O expenses including allocations to be reimbursed by other ProgramAdministrators.Table 8: CSI-Thermal Expenditures by PA (Natural Gas)Natural GasJanuary 1, 2014 – March 31, 2014Expenditure TypeCCSEPG&ESCGTotalAdministration 52,655 192,933 140,555 386,143Market Facilitation 95,644( 209,519)* 124,401** 10,526Measurement &Evaluation 0 94 0 94Incentives Paid 155,172 558,234 2,718,885 3,432,291Total 303,471 541,743 2,983,841 3,829,054*This is a reversal of year end accruals over-estimated in 2013.**This amount also includes total Statewide M&O expenses including allocations to be paid by other PA’s.13

Table 9: CSI-Thermal Expenditures by PA (Electric/Propane)Electric/PropaneJanuary 1, 2014 – March 31, 2014Expenditure TypeCCSEPG&ESCETotalAdministration 13,233 45,601 20,555 79,389Market Facilitation 24,096( 100,192)* 1,074( 75,022)Measurement &Evaluation 0 31 0 31Incentives Paid 9,570 1,275 4,669 15,514Total 46,899( 53,285) 26,298 19,912* This negative represents a reversal of year-end accruals, which were over-estimated in 2013.14

4. Program ProgressProgram participation during Q1 of 2014 was not what the PA’s had hoped for. It was expected thatthe launch of the Pool Program would result in increased program adoption and more incentivesdisbursed. But the complexity of the pool calculator required extensive research and this not onlydelayed its launch, but likely delayed market adoption. The PA’s have done our best to managecomplex scientific and economic decisions, while working collaboratively with Industry / CALSEIA.Some points of contention between Industry/CALSEIA and the Program PA’s involved the effect ofwind on unglazed collector performance, installation issues such as slope on pipes and collectors,flat roof installations, CPM monitoring, roof penetrations, azimuth (north-facing roofs) and header/ riser issues including riser sagging. Most of these issues have been resolved.Another interesting development during Q1 2014 involved the release by the CPUC Energy Divisionof their report titled, “Review of the Incentive Levels and Progress of the California Solar Initiative –Thermal Program”, dated January 29, 2014. This report was submitted to the Legislature, asdirected by Section 2867.1(b) of the PUC as established by AB2249 (Buchanan, 2012), and inaccordance with Section 9795 of the Government Code.In this report, the CPUC identifies some of the key factors leading to underperformance by theProgram, most notably the start of the Program coincident with a precipitous drop in the price ofnatural gas. As payback period is a critical ingredient in decision-making, price of natural gas hasbeen a longstanding barrier; one which the PA’s cannot control. The Report called out manyimportant issues listed here, in brief: Installation costs have not declined as expected Single Family sub-programs are performing much worse than the multifamily andcommercial programs The 2012 increase in incentive levels has not led to a significant increase in programparticipation A substantial M&O program has been largely ineffectual for the single family program The low income program is doing relatively better than the general market program,especially in the multifamily market Avoided gas costs are lower than expected (due to economic crisis of 2008 and retail pricesdropping by roughly 20%) The new technologies and the swimming pools sub-programs may breathe life into theProgram.The Report states the following Options are presently available to the Commission: Further front-loading of incentives, moving more money towards Steps 1 and 2 Removal of separations between customer class incentive budgets, making incentivesavailable on a “first come first served” basis Request for guidance and policy suggestions from parties; the Commission may take publiccomment and consider what changes to make in response to suggestions from the solarthermal industry, Program Administrators and other parties.15

In light of this, the PA’s and engineers, with our liaison from the CPUC (James Loewen), haveembarked on conversations about modifying the Program to meet these significant challenges.Applications, Cost and Other DataThe CSI-Thermal Program began accepting applications for single-family systems and multifamily/commercial systems on May 1, 2010 and October 8, 2010, respectively. Applications forpropane-displacing SWH systems were available on February 7, 2012, while the low-incomeprogram began on March 29, 2012. In addition, the CPUC approved an increase in the single-familyresidential and the commercial and multi-family incentive levels effective July 4, 2012.Tables 10, 12, 14, 16 and 18 present the quantities of applications received by each PA in Q1 2014,as well as the corresponding incentives and energy savings for those applications. Tables 11, 13,15, 17, 19 & 20 show the average costs of systems for completed projects by PA and customer classsince program inception.Table 10: Summary Data: CSI-Thermal Single-Family Applications by Status (Natural Gas)CCSEPG&ESCGQ1Q1Q1Application (Number)312108123Incentives ( ) 4,401 27,352 145,440 177,193Capacity (First Year ExpectedEnergy Displaced in therms)2701,7618,42110,452TotalAPPLICATIONS RECEIVED16

Table 11: Average Cost per Single-Family Project (Natural Gas)Average Project Cost perSingle-Family Project ( )*Av

program engineers, working with TESS, developed the pool model based on the TRNSYS Type 344, as required by the pool decision. Due to significant performance variations which r equired further . Edison Company (SCE), and Southern California Gas Company (SCG). . Governor Arnold Schwarzenegger signed Assembly Bill (AB) 1470 (Stats. 2007, ch .